Nation editor-at-large and host of MSNBC’s All In with Chris Hayes.
As promised here's my comment in this week's issue on the AIG bonus issue. It's behind a sub-wall, but I'm just gonna yank it out and post it here:
The infamous letter from AIG CEO Edward Liddy to Treasury Secretary Tim Geithner--the one in which he informs the good secretary that whatever the administration's preference might be to the contrary, the company will be paying $165 million in bonuses to its financial products division--is destined to be studied years from now as the perfect text for this strange moment in American capitalism. Facially supplicant yet substantively defiant, its rhetorical posture is that of a bank robber who calls the teller "ma'am" before asking her calmly to put the money in the bag. "On the one hand, all of us at AIG recognize the environment in which we operate and the remonstrations of our President for a more restrained system of compensation for executives," Liddy writes. (Nice touch, the use of "remonstrations" to describe the president's attempts to rein in Wall Street with moral suasion.) "On the other hand, we cannot attract and retain the best and brightest talent to lead and staff the AIG businesses--which are now being operated principally on behalf of the American taxpayers--if employees believe that their compensation is subject to continued and arbitrary adjustment by the U.S. Treasury." This is the language of someone who has sized up what an organizer would call "the power relations" and believes they are balanced in his favor.
The question is, Was his calculation correct? At this writing, Liddy is appearing before Congress, sitting in the proverbial hot seat. On Capitol Hill there is unanimous agreement that the proposed bonuses are an intolerable insult to taxpayers. They certainly are. But one learns to mistrust unanimity in Washington. There's something vaguely redolent of the earmark foolishness in the dramatic expressions of anger from elected officials--what might be called the Law of Small Numbers. When it comes to money, trillions of dollars is a statistic, but $165 million is an outrage. Then there's the fact that much of Washington, including, sadly, the Obama administration, was complicit in setting the stage for this drama. Ron Wyden and Olympia Snowe co-sponsored an amendment to the recovery act that would have required TARP recipients to pay back bonuses in excess of $100,000 or face tax penalties. It was mysteriously removed from the final bill just before passage. Geithner and Larry Summers, meanwhile, have both reportedly worked internally to water down statutory limitations on executive compensation for bailed-out firms.
I'd bet against AIG's financial products traders keeping their bonuses: public outrage is running too high. But then what? The power imbalance is the fundamental problem, and it remains. At a Nation-sponsored panel on the financial crisis in New York City on March 6, an audience member asked, "Why aren't people in the streets?" There are a number of answers: the capital-L, to-the-streets Left is withered. The absolute level of privation doesn't begin to approach the mass starvation and immiseration of the Depression. The whole goddamned thing is so complicated, no one's quite sure what to make of it.
Perhaps, though, AIG overplayed its hand. Perhaps it has catalyzed something. A coalition of progressive groups including MoveOn, SEIU and ACORN has announced Take Back the Economy protests at banks and corporate headquarters across the country on March 19. Another group of activists have set up a website, A New Way Forward (anewwayforward.org), to facilitate the organization of grassroots protests in favor of bank nationalization on April 11. Their slogan--Nationalize. Reorganize. Decentralize.--represents the first attempt to distill the intimidating complexity of the financial rescue into a straightforward popular demand. And power, as Frederick Douglass so sagely observed, concedes nothing without a demand.
Like everyone I've been following the AIG brouhaha, though with more than a bit of skepticism at the howls of outrage from the political class. (I have some more extended thoughts in this week's issue, which should be up soon). Now that it seems that voiding the contracts is too difficult legally, congress is proposing to tax the bonuses at 90%Q. I kind of like the politics of this, if only because it will force the GOP to put their money where their mouths are: if they're as outraged as they say, they'll have no problem ignoring Grover Norquist and Rush Limbaugh and voting for the tax.
But Dean Baker also floats what might be a simpler, cleaner solution: just make what's left of the AIG equity-holders pay for it.
Lots, lots lots going on, as the budget begins to wend its way through both houses. Greg Kaufmann has the goods:
This Week on the Hill
The Senate will take yet another shot at a federal lands package leftover from 2008, which has thus far been tied in procedural knots thanks to senator Tom Coburn.
The House will take up the GIVE Act this week. The bill would more than triple the number of AmeriCorps volunteers from 75,000 to 250,000 and increase the education reward to $5,350 for next year. It also would create a summer service program for high school and middle school students with a $500 stipend to go towards college costs.
There are about a gazillion hearings on the Hill this week. According to CongressDaily,House Appropriations subcommittees alone will hold 20 as they work towards a goal of passing the House budget resolution for FY10 the week of March 30.
If you want to see testimony against big defense cuts, a whole bunch of Generals will be appearing before both the House and the Senate -- we're talking the Commands for the following: Southern, Northern, Pacific, Africa, Transportation, Strategic, Republic of Korea/United States Combined Forces, Army Medical, and Joint Forces.
Here are some defense hearings that might get into some arguments for significant defense cuts: the House Budget Committee on Defense Dept.'s FY10 Budget includes the GAO which found cost overruns of at least $300 billion for the top 75 weapons systems in 2008; an Appropriations subcommittee looks at the Nuclear Weapons Complex with progressive Philip Coyle offering counter-arguments to the National Nuclear Safety Administration; advocates for the Future Combat Systems Programs will appear before a House Armed Services Subcommittee which CongressDaily says "has tried every year to trim money from the program's budget"; look for Michael Krepon of the Henry Stimson Center to provide a voice of reason at a hearing on Space and US Security; finally, the House Committee on Foreign Affairs examines the DoD's Expanding Role in Foreign Assistance and one senior committee staffer says it will be "lively."
House and Senate Committees continue to work at health care legislation. The Committee on Energy and Commerce looks tomorrow at "Ensuring Affordable Coverage". Other health care hearings include Military Suicide Prevention and "Closing the Health Gap of Veterans in Rural Areas".
In finance, the hearings that will get a lot of press are on Ponzi Schemes and Offshore Tax Evasion and on AIG's Bailout and Impact on Global Economy. Both the House Financial Services Committee and Senate Banking Committee will look at how to revamp Oversight of Systemic Risk in financial firms. Senate Banking will also look at Current Issues in Deposit Insurance. The House Judiciary will examine the notion of "Too Big to Fail" and the role of antitrust law in government-funded bank consolidation. The House will also look at oversight of both the Stimulus and TARP.
Other notable hearings include House Appropriations on Livable Communities, Transit, and Green Practices; House Education and Labor on Early Childhood Development policy; and House Homeland Security on Human Trafficking Recent Trends.
From Greg Kaufmann:
This week Congress finished -- finally -- some leftover business from the Bush era. After fights over earmarks, automatic pay raises, and anything else Republicans thought they could score points with, the Senate finally approved the $410 billion FY09 omnibus spending package and President Obama signed it. There were indeed more than 8,500 earmarks costing over $7.7 billion -- $4.6B sponsored by Dems and $3.1B by Republicans. Obama said that moving forward earmarks should be disclosed on the web and those for private, for-profit companies should be open to competitive bidding. Sen. Russ Feingold and two Republicans -- Sen. John McCain and Rep. Paul Ryan -- went further than that. They introduced legislation to give Obama a limited line-item veto for a new War on Earmarks.
Sadly, another piece of legislation from the Bush Days remains in limbo. A federal lands package -- combining 166 bills -- would set aside more than 2 million acres as protected wilderness and 100 miles of wild and scenic rivers. Last year Sen. Tom Coburn -- the Grim Reaper of Senate legislation -- stalled it. The Senate approved it this year but in a parliamentary twist this week the House fell just two votes shy of the 2/3 majority it needed (under suspension of rules which allow a vote without amendments). According to CongressDaily, Democratic leaders are now working on a strategy that would allow the bill to pass the House with a simple majority.
The much anticipated Employee Free Choice Act was introduced in the House by Rep. George Miller and in the Senate by Tom Harkin. The Senate doesn't have the 60 votes it needs yet to beat a Republican filibuster, and the House won't take it up until it passes the Senate. Harkin said he would like to see the bill on the floor as early as late April but Sen. Harry Reid has said it won't come up until the summer.
This week was packed with efforts at rebuilding our financial regulatory architecture. Sens. Chuck Schumer and Dick Durbin introduced legislation to create a consumer protection agency for financial products such as predatory loans. The idea was first conceived by Elizabeth Warren, Harvard Professor and Chair of the Congressional Oversight Board for TARP.
A House Financial Services subcommittee instructed the SEC to come up with "new guidance" within three weeks on revising "mark-to-market" accounting rules, which require banks to report the current market value of assets. The banks would like to replace that with fictitious market value.
Frank is very clear on restoring another rule -- the "uptick rule." This regulation was adopted after the market crashed in 1929 and eliminated by the SEC in 2007. It only permitted short-sales when the the last movement of the price of the security was up, thereby eliminating the ability of shorts to single-handedly drive down a stock price. Although Frank was hopeful the change could be made within a month, according to The Boston Globe the SEC said it could be "months away." (In other Frank news, it's worth checking out this fun, intelligent and tough press release he sent out this week.It looks back at the causes of the financial meltdown and defends against recent Republican attacks on him.)
Sen. Bernie Sanders introduced legislation that would cap credit card interest rates at 15 percent. He noted that banks receiving taxpayer money with one hand are slapping consumers with the other -- charging heavy fees and usury rates as high as 30 percent. "What Wall Street and these credit card companies today are doing," he said in a floor statement. "is really not anything different than what gangsters and loan shark artists do who break people's kneecaps when they don't pay back -- except these bankers have three-piece suits…."
The House-approved bill allowing bankruptcy judges to reduce mortgage principals seems to be stalled in the Senate. According to CongressDaily, "11 Democrats have major concerns… and Senate GOP leaders feel confident about stopping the measure." Sens. Durbin and Schumer have moved on from negotiating with the big banks like Citigroup and are now looking for support from the credit unions to gain their colleagues' endorsement.
In other Obama Administration news, the announcement of the new drug czar-nominee -- Seattle Police Chief R. Gil Kerlikowske -- signaled a shift towards treatment rather than incarceration for nonviolent drug offenders. Vice President Biden also spoke of an "emphasis on alternative drug courts," according to the Washington Post. Greg Berman, Director of the Center for Court Innovation, told me: "I think it is another sign that the Obama Administration intends to chart a very different course when it comes to the administration of justice…. All of the signs… seem to point in generally the same direction: that the years ahead will see a renewed investment in innovation and rethinking business as usual."
Another nominee -- Charles Freeman for head of the National Intelligence Council -- withdrew from consideration amidst much controversy. Opponents questioned financial ties to China and Saudi Arabia as well as his positions on Israel-Palestine issues. Freeman himself blamed "the Israel lobby" and its "utter disregard for the truth."
Finally, the EPA proposed a new reporting system for 13,000 facilities that are responsible for 85-90 percent of US greenhouse gas emissions.
Word is official that the Atlantic's Ross Douthat will get the coveted Times Op-Ed slot left vacant by Bill Kristol. Notwithstanding my desire to see more women on Op-Ed pages (and in the pages of the Nation!) I think this fantastic choice. I consider Ross a friend, so you can take this with a grain of salt, but he's genuinely principled and thoughtful. He's a very fine writer, and always interesting to read. He believes in a lot of things I think are misguided or, particularly on social issues, just flat out, irredeemably wrong. But that's the nature of political disagreement, and Ross' particular brand of conservatism really is both difficult to precisely classify and genuinely, deeply, "conservative" in the sense that it carries with a kind of wistful sorrow at the fallenness of the modern world. Here's an excerpt of a review I wrote of his first book:
But what permeates the book is a sense that the Harvard he had expected to be a "scholarly island, a place in the world, but not of it, like the monasteries whose power and dignity universities long ago usurped" is instead a kind of glorified pre-professional school where students are caught in the adult rat-race before they even turn 20. If meritocracy is a parody of democracy, as the Christopher Lasch epigram that opens the book reads, then Harvard, in Douthat's view, mirrors our money- and power-obsessed society: students climb over each other to gain acceptance to exclusive clubs, embezzle student association funds and even engage in campaign finance violations during student elections, followed by a full-out Clinton-style impeachment frenzy. All of this, Douthat argues, is the result of a school culture that, like the culture at large, worships success above all else. Because the entire ethos of Harvard, from its administrators to its students to the author himself, is so caught up in the pursuit of worldly success, Douthat fears the living wage movement was "trying to put a Band-Aid on a machete wound--a wound that wasn't Harvard's bottom-line mentality but an entire system of selfishness in which our university was just a small wheel turning within larger ones."
I think this captures what I like best about Douthat: his conservatism has within it a healthy skepticism for many of the trappings of modern capitalist society.
Simon Johnson, the former IMF economist has become the Lil Wayne of meltdown commentary. He's everywhere: This American Life, Fresh Air, TPM, etc. And I've found him incredibly persuasive and lucid on all things meltdown related. But there's something that's been nagging me. One of Johnson's standard lines about the crisis is that receivership/nationalization would be the standard IMF prescription in this case if it were any other country. But my sense-- and I know this is controversial terrain -- was that the IMF *really* screwed up its management of financial crises around the globe in the 1990s. when Johnson was working there. Which makes me not exactly heartened to hear that nationalization is the IMF prescription in our case. Thoughts?
Greg Kaufmann's got the preview:
This Week on the Hill
It's like the movie Groundhog Day -- only with Harry Reid trying to woo Republicans so he can finally get cloture -- as the Senate tries yet again to pass the $410 billion FY09 omnibus spending bill this week.
This bill is leftover from last year's business when Congress and Bush couldn't agree on the division of assets before parting ways. It's taken far longer than anticipated to gain Senate approval and according to Politico that led to a nasty fight between Democratic leaders last week. Until the bill passes, funding for most agencies is frozen at 2008 levels. As a price for the needed 60 votes Reid is letting the GOP offer 12 more amendments this week -- in addition to the 12 that have already been shot down. Look for more ranting about earmarks. According to CongressDaily, the vote is expected to be so close that Sen. Ted Kennedy will be in town for it.
Today Pres. Obama will continue to free science from the Bush Dark Ages as he signs an executive order lifting the ban on federal funding of embryonic stem cell research. Sen. Ben Cardin of Maryland -- home to NIH and Johns Hopkins University -- campaigned on the issue with Michael J. Fox in 2006 and will attend the signing ceremony.
Also this week, Obama, Vice Pres. Biden, and other administration officials have invited every state to send a representative to discuss implementing the Recovery Act to stimulate the economy.
OMB Director Peter Orszag and Treasury Secretary Tim Geithner continue to make their rounds on Capitol Hill…. Orszag is talking Obama's FY10 Budget and FY10 Health Care Proposals to the Senate Budget and Senate Finance Committees, respectively. Geithner will also speak on Thursday with the Senate Budget Committee on "FY10 Budget and Revenue Proposals", and also on "Treasury Actions Relating to the Financial Crisis" with the House Appropriations Committee. Cabinet members Steven Chu (Energy), Arne Duncan (Education), and Eric Shinseki (VA), will all be making the case for their respective department's budget.
Two House hearings will look at health care reform: Making Healthcare Work for American Families and Expanding Coverage, Controlling Costs…. and Ways And Means also looks at a "Review of Veterans Affairs Department Challenges" -- including healthcare.
The House Appropriations Committee will take a hard look at incarceration issues this week with at least five or six hearings, including: drug treatment, innovative reentry programs, and major challenges facing federal prisons.
At least four -- count 'em -- four hearings on violence in Mexico and on the border: House Homeland Security looks at combating Mexican border violence; Rep. John Tierney's House Oversight subcommittee holds a hearing on "Money, Guns, and Drugs: Are U.S. Inputs Fueling Violence on the U.S.-Mexico Border?"; House Appropriations examines "The Merida Initiative" to train military and law enforcement in Mexico and Central America, as well as the "Department of Homeland Security Response to Violence on the Border with Mexico".
As Congress prepares an energy bill and new climate policy, one issue that will come up again and again is whether consumers will be too burdened by the transition. Two house hearings will delve into that issue: Energy and Commerce explores "Consumer Protection Policies in Climate Legislation" on Thursday; and Ways and Means hears testimony on protecting low- and moderate-income families while curbing global warming.
Other interesting hearings going on that are worth checking out: The Nuclear Weapons Complex with the brilliant and progressive Philip Coyle; Problems/Potential with the Agency for Toxic Substances and Disease Registry (ATSDR); Circuit City, Chapter 11, and Failing to Save 34,000 Jobs; current and future worldwide threats to US national security; and the Smashing Pumpkins' Billy Corgan rocks the House regarding royalty exemptions for AM and FM radio.
One other item of note: Tuesday is International Women's Day. Democratic Rep. Betty McCollum of Minnesota will keynote USAID's Women: A Driving Force for Economic Recovery.
Yet another very busy week on the Hill. Greg Kaufmann has the goods:
The House delayed its vote on the DC Voting Rights Bill due to the Senate's draconian gun amendment. Advocates are still hopeful a less extreme alternative can be agreed to in the House-version so that 600,000 DC residents will finally get a little voting representation to go along with their taxation.
In brighter news, the House passed Rep. John Conyers' "Helping Families Save Their Homes Act". The legislation allows bankruptcy judges to reduce the principal on mortgages. According to CongressDaily, Sen. Richard Durbin hopes to bring the bill to the floor before the April recess.
The Obama Administration also began implementation of its $75 billion anti-foreclosure plan. While the plan will help an estimated 4 million borrowers reduce monthly payments through lower rates, it doesn't include as strong a provision for principal reduction as the Conyers legislation so we need the Senate to move on the bill and not water it down.
The Senate took up the $410 billion omnibus spending bill for FY09 this week. The government has been operating under a Continuing Resolution (CR) -- spending at FY08 levels -- since Congress declared enough with the Bush budgets and took a pass on his last one. A vote was expected this week but the Senate hasn't been able to get the 60 votes needed for cloture, so they have been busy defeating GOP amendments like Sen. McCain's "don't increase any spending amendment" and Sen. Murkowski's "keep Bush's last gasp rule to limit protection of polar bears amendment." They now need a new CR since this one expires at midnight tonight and voting on the omnibus isn't expected until Monday or Tuesday.
The Obama Administration held its Health Care Summit with key players across the spectrum. The President seemed to be extending his trademark olive branch to the GOP when he said, "If people think we can simply take everybody who is not insured and load them up in a system where costs are out of control ... we will run out of money…. I'm talking to you liberal bleeding hearts out there. Don't think we can solve this problem without tackling costs. And that may make some in the progressive community uncomfortable. But it's got to be dealt with." I'm wondering which progressives he's spoken with who don't know cost containment is key to universal access to healthcare? One big highlight of the summit: Sen. Ted Kennedy was there, getting back to work.
Both Kennedy -- who chairs the Health, Education, Labor and Pensions Committee -- and Senate Finance Chairman Max Baucus said they intend to produce a single comprehensive healthcare bill. Baucus hopes the bill will be on the floor in July. House Majority Leader Steny Hoyer wants a bill by August.
Treasury Secretary Tim Geithner and OMB Director Peter Orszag were on the Hill talking budget and taxes with congressional committees. Orszag defended against GOP charges that the Administration's recovery projections are too optimistic while Geithner was open to Baucus' concerns about limiting deductions for the wealthy. (No surprise there since Geithner viewed taxes as optional in his previous life.) On Tuesday Fed Chairman Ben Bernanke had the unenviable task of testifying about another cool $30 billion being doled out to AIG. Sen. Bernie Sanders also pressed Bernanke to reveal which banks received $2.2 trillion in taxpayer money from the Fed. Bernanke refused, and Sanders has now introduced legislation to compel disclosure.
Defense contract reform was huge this week -- with President Obama, and the Senate and House Armed Services Committee all taking it on. This is no small matter, since the GAO has found cost overruns of at least $300 billion for the top 75 weapons systems in 2008. But some of the leaders for reform here -- like Sen. Carl Levin -- are the same characters who will fight against sensible cuts to Cold War weaponry.
In other news… Sen. Pat Leahy held a hearing on his proposal for a truth and reconciliation commission to examine the Bush-Cheney Constitutional assault.... Rep. Rush Holt introduced legislation to establish a 9/11-style commission to investigate the 2001 anthrax attacks and government response… a FEMA Deputy Administrator revealed that Republican governors Haley Barbour and Bobby Jindal have failed to spend half the funds allocated for clean up, bridges, roads, schools…. Rep. John Tierney held a hearing this week and posed the question of whether it's in our national security interest to send more troops to Afghanistan to prevent a safe haven for Al Qaeda when it already has one in Pakistan and could easily establish them in Yemen, Somalia, Sudan, Algiers, etc.?
Today in Columbus, Ohio, Sen. Sherrod Brown and Pres. Obama attended the graduation ceremony for 26 police academy cadets who had been laid off during their training and then rehired with the passage of the Recovery Act.
In the short-term, I think the answer is no. As I argued in my column last week, the plan does fairly elegantly snatch some low-hanging fruit. But the problem is that there's just not enough fruit on the low branches to really get at the problem.
In the week or so since I've written the column, I've become more convinced that it's just not going to get the job done. Originally I had a graf in the column that said, more or less, that a useful way to think about the mortage problem is as an interest problem and a principal problem. That is, on the one hand the rates people are paying are too high, thanks to teaser rates, ARM's, fees, etc..., and on the other the prices of their homes are just over-valued. Alyssa Katz, explains just what this means in terms of the plan's shortcomings:
For many borrowers, a lower payment will be all the difference between staying in one's home and going into foreclosure -- for now. But the Obama plan is a short-term fix. It doesn't do the one thing that would actually help homeowners in the long haul, and that is reduce the amount of principal they owe. The loan mods that these brokers are selling, and that the Obama administration is now promoting, are new and improved variations on the exotic mortgages that seduce borrowers in the first place. They charge a manageable amount now, and then hit the borrower with higher costs down the road.
"Loan modification success rates are ridiculously low," agrees Debra Zimmerman, an attorney with Bet Tzedek Legal Services in Los Angeles who represents borrowers. "Until banks are ordered to reduce principal too, there will be no solution."
Over at the Corner he writes.
While some conservative bloggers plunge into depths of despair that Rush Limbaugh gave a speech at CPAC not up to their standards and the White House congratulates itself over its supposed cleverness in elevating Rush, can we all take a deep breath please? Barack Obama and the Democrats have the initiative. Until such time as their policies are perceived to have failed, it doesn't matter too much what Republicans do. Yes, they obviously should endeavor to be sober and creative--replenishing their policy arsenal for the day when the public is seriously paying attention to them again--but the big question in American politics right now is how Obama handles the financial crisis and the economy. In the grand scheme of things, everything else is commentary.
This is true across the political spectrum. It's very easy to get caught up in the cable-news cycle. And, indeed, one of the Obama crew's chief virtues in their determination to take the long view. Ultimately, the political success of the White House is going to depend on its performance in avoiding a depression. Of course, the arrow of causality doesn't run one way. Obama needs to be politically deft and imposing in order to pass an agenda that has a hope of forestalling said depression. But this isn't a campaign and it's not the Clinton years, despite the degree to which much of our political culture remains habituated to both.
I've been making my way through the first season of the West Wing (a little latae, I know!) and I'm just struck by how trivial the politics of that time seem. They're constantly dealing with blow-ups over flag burning amendments or White House staffers using drugs. These days no one would care. We have very, very very serious problems on our hands and the political fate of Obama, and to a broader extent the American left is going to rise or fall on whether the people currently running a government do a good job of solving them.